Closing Protection Coverage - what's that?

Many think they don't need it but you better think twice. Many real estate agents and professionals don't even know what it does or why we as a title agent bug everyone to death to get the required notice signed by all the parties at the beginning of each transaction which is required by law.

Closing Protection Coverage (CPC) was created to protect the consumer directly from the title agent. Simply because of the many title agent defalcations and fraud that happened right here in the state of Ohio and even here locally in Columbus that crushed and financially destroyed many consumers. Unfortunately, there were title agents that forgot to pay off mortgages among other things and then went out of business.

First, let me say that CPC has always been offered to lenders and most lenders have always required it. It wasn't until recently January 1, 2007 that the Ohio legislature put into law that we have to offer it to all parties of a real estate transaction. This includes both the buyers, sellers and the lender. I know, I know, you are thinking, you just want to sale this coverage to make money. No, not at all. Actually, we as the title agent do all the logistical work of creating, collecting, reporting and remitting to our underwriter and never receive one cent.

So, your now thinking so why does he want to sell this so bad? Well, because this is probably one of the best things the lawmakers have done to protect the ultimate consumer from all the fly by night title companies and unscrupulous agents. Actually, in these times, I personally would purchase it no matter where I closed and no matter whether it was a purchase, sale or refinance. The public and the real estate professional think that because there is title insurance involved that they simple don't need it.

The official description of coverage says the following:

The Closing Protection Coverage indemnifies you against the loss of settlement funds resulting from any of the following acts of the Licensed Agent or anyone acting on behalf of the Licensed Agent, subject to certain conditions and exclusions specified in the Closing Protection Coverage Form:

1) Theft, misappropriation, fraud, or any other failure to properly disburse settlement, closing or escrow funds; and 2) Failure to comply with any applicable written closing instructions, when agreed to by the Licensed Agent.

There are just two many things that can go wrong that could effect you as the consumer that could possibly be covered with this insurance. Plus, more importantly it puts the underwriter on the hook for the agents actions.

Still, even today, we have many real estate professionals that advise their clients not to purchase it in order to save the mere $15 dollars if purchasing and $50 if selling a home. They usually say this because they have high regard for our company, maybe because we have been around for 30 years, and we appreciate that, but it won't hurt our feelings one bit if you recommend it, and that advice doesn't do the consumer any good if something happens even beyond our control.

Welcome

One of the main reasons for this blog is to help educate consumers and real estate professionals here in the Columbus Central Ohio marketplace. When I say real estate professionals, I wish to include the following: Real Estate Agents, Lenders, Bankers, Mortgage Brokers, Attorneys and others.

Most consumers are fairly familiar with real estate agents and mortgage people but have little knowledge of the real estate process, title insurance issues and the costs associated with it. I believe that when you are going to make such a big investment like a house you should know everything that will go into the transaction.

Part of the reason is that they typically leave it up to the real estate professionals to take care of everything. This may work well for some but may not always be in the consumers best interest.

It is up to all real estate professionals to help consumers make the best choice when it comes to their entire transaction. Our goal as fiduciaries should be to assist the consumer in making decisions that are best for them. In return, this will lead to long term benefits for the real estate professionals in the form of referrals and repeat business. If your client trusts you they will be willing to tell their friends, family and other business associates about you.

It's time for consumers to learn more about the closing process and take control of their real estate transaction. Consumers, mortgage lenders, real estate and title professionals are invited to add comments and questions that contribute to the overall goal. Thank you for joining us.